China to Sign WTO Accession Documents on November 11th  University of Warwick Explains Why

Originally Published 9 November 2001

Dr Shaun Breslin

China is expected to sign the accession documents to the World Trade Organisation on 11th November 2001 even though many believe that the WTO needs China to sign up (to control it and regulate it) more than China needs the WTO. Why is China so keen on joining? A recent research papers by Dr Shaun Breslin at the University of Warwick's Centre for the Study of Globalisation and Regionalisation may have the answers.

Dr Breslin noted the surprise of many at China's interest in joining WTO:

"At first sight, it is not easy to see why Chinese Communist Party has been keen on joining the WTO - an agency of global capitalism. The case for chasing WTO entry seems even stranger in light of the lessons of the Asian financial crises. The key reason that China survived the worst excesses of the crises was because it retained a relatively closed economy, with a strictly protected financial structure and lack of full currency convertibility. Why then, risk all this in pursuit of WTO membership?."

But in the same paper he gave the following reasons why China is keen to sign up to WTO:

A key reason is China?s need to stabilise access to the US market. Although access to the US market has been facilitated by the annual renewal of Most Favoured Nation Status, there is considerable unease over the lack of certainty such an annual renewal generates. US toy and textile producersfor instance continue to feel threatened by China, also those who oppose China?s human rights record, such Tibetan independence supporters, critics of China?s one-child policy, would also aim to persuade the US not to renew MFN status .

Secondy the Chinese leadership did so much to join the WTO simply because they set membership as a target! Communist party states have a "goal rational approach" and often set targets, and make sure that everybody knows when they have been met (or more typically, exceeded ahead of time). Having established the goal of joining the WTO (and frequently setting the end of the century as the deadline) then the goal has to be achieved.

Thirdly, the aim of joining by the end of the century was also inspired by a desire to be involved in the negotiations on the WTOs future. Exclusion would not only prevent any Chinese input into any new rules of international trade, but might also see a new set of criteria and expectations being established for membership. Better, then, to accept the current set of criteria than face a possibly more stringent set of conditions in the future. There was also a real fear that the EU and NAFTA might become economic fortresses that developing countries outside the global trading organisation would be unable to penetrate. .

Finally China wants to close down the high proportion of loss-making state owned enterprises (SOEs). The Chinese leadership accept that they are no longer economically viable. Indeed, they have become such a drain on the banking system through the non-repayment of loans that the entire financial system has been seriously undermined. But allowing loss-making SOE to go bust will result in a significant rise in urban unemployment, which could cause social and political unrest. There were over 10,000 officially documented cases of riots, strikes and disturbances in China last year ? many aimed against the closure of loss making factories. Social stability in parts of China remains fragile, and many local leaders fear for the future. WTO membership was seen as a means of enforcing change on resistant local elites and as a means of using external international pressure to promote domestic change.

For further Information contact:

Dr Shaun Breslin, University of Warwick(Centre for the Study of Globalisation and Regionalisation)Tel: 24 7657 2558 Home: 01926 779142shaun.breslin@warwick.ac.uk